Chapter 07

„ Spare Parts
Inventory
Management
Spare Part
„ Spare part means a part or sub-unit or
a major assembly which is available in
stock for substitution when needed.
Need for Scientific
Management of Spare Parts
Factors which necessitate scientific spare parts
management are:
„ Random and unpredictable pattern of failure of
machines and equipments
„ Long lead time required for procurement of spare
parts from original equipment manufacturers
„ Difficulty in manufacturing of spare parts because
of non-availability of special materials
„ High tendency for obsolescence of machines and
equipments
Classification of Spare Parts
„ Regularly used spare parts
„ Irregularly used spare parts
Classification of spare parts based on
movement analysis

„ Fast moving
„ Slow moving
„ Non-moving
Classification of spare parts based
on functional characteristics
„ Insurance spares or capital spares
„ Rotable spares or Repairable spares
„ Overhauling spares
„ Maintenance spares
Salient Features of Spare Parts
„ About 10 % of value of a machine is invested
is spare parts at any point of time
„ About 40 percent of the total working capital
is tied up in spare parts inventory
„ About one third of spare parts inventory is
non-moving or obsolete
„ The lead time is long and prices exorbitant
„ The inventory carrying charges are about 30
percent of the value of inventory
Additional Factors influencing
Spare Parts
„ The Costs involved in spare parts
management
„ The Quantity of spare parts to be
procured
Major Factors involved in the
Spare Parts Inventory Problems
„ Location of the Plant
„ Import Policy
„ The Nature of the Plant and Machinery
„ Availability and Lead Time for
Procurement
„ Age of Machines
„ Reliability of the Parts
Factors that influence spare
parts planning
„ Location of the plant
„ Government regulations on imports
„ Sophistication of industry and the degree of
automation
„ Lead time for procurement of spare parts
„ Service level desired
„ Relevant costs such as ordering cost,
inventory carrying cost, stock out cost
Factors to be considered with
respect to Spare Parts Inventory
Policies
„ Form of spare parts
„ Source of supply of spare parts
„ Whether to stock or not to stock certain
spare parts
„ Standardization
„ Ordering method
Overhauling Spares
„ Overhauling Spares are those which are
used when a machine or equipment is
completely stopped from working,
periodically and the same is
reconditioned by replacing worn-out or
defective parts to give a new lease of
life to the machine or equipment
Considerations in Overhauling
„ Replace some spare parts even if they
are serviceable or can be repaired
„ Replace items such as ‘O’ rings, oil
seals, fan belts, entirely even if some of
them appear to be in good condition
„ Replace the repair kit wherever
provided earlier
Obsolete Spares
„ Obsolete spares are those which are in good
working condition but which are no longer
useful for the company’s operations because
of replacement of machines and equipments
by machines and equipments of different
designs or technology or modification in the
design of equipments or machines
manufactured by the supplier and also
because of changes in the manufacturing
processes or materials used or changes in the
products manufactured.
Reasons for obsolescence of
Spare Parts
„ Insufficient attention to initial provisioning of
spares
„ Inflated list of recommended spare parts
given by original equipment manufacturers
„ Ordering parts even though the equipment or
machine is being phased out due to service
life or change in technology
„ Wrong indenting or error in forecasting the
demanded for spare parts
„ Wrong codification leading to duplication
Ordering Method
„ Stock Control Ordering Method
„ Scheduled Ordering Method
„ Base Stock Control Method
„ Order or Demand Method
Stocking Policy for Insurance
Spares
„ Probability of being used is low and
expensive
„ When not available the machine
downtime will be high
„ The firm has to take decision to stock
either one number of the insurance
spare or not to stock the spare part
Stocking Policy for Capital
Spares
„ The stock level may range between
one to three during the life time of the
equipment or machine
„ Decision depends on
1. Overstocking cost
2. Cost of under stocking or stock out
Stocking Policy for Rotable
Spares
„ Spare part that has failed can be
repaired and replaced
„ Reserve of rotable spares has to be
maintained in the maintenance stores
„ Incase of failure of a rotable spare part
it is replaced from the reserve and the
failed item is repaired and stored back
in the stores
Stocking Policy for
Maintenance Spare Parts
„ Selective inventory control techniques
such as VED, FSN, SDE and the concept
of EOQ can be used to stock these
spares
„ Hold set of spares for every machine
„ Keep several sets of spares at the
central stores